Norwegian cryptocurrency miners lament proposed loss of energy use-related tax relief

Norwegian government plans to stop power consumption-related tax breaks for crytopcurrency miners could have dire consequences for the levels of overseas tech investment the country receives, it is claimed.

The measures, expected to be introduced in March 2019, could see cryptocurrency miners pay more for their power use and consequently suffer a drop in total income.

The move appears to be part of a wide-reaching clampdown by the Norwegian Tax Administration on the activities of cryptocurrency miners, many of whom the tax collection agency says are failing to declare all the income their pastime generates in their annual tax returns.

According to the organisation’s own figures, 8,000 Norwegians claim to have accrued a collective cryptocurrency wealth of more than NOK5bn, but only one-fifth of this income was declared in the tax returns the agency received in 2017.

As Computer Weekly understands it, Norwegian datacentre operators will still be liable for tax breaks under the revised rules, but those specialising in cryptocurrency mining will not, including Hive Blockchain Technologies.

In a recent note to shareholders and investors, the company revealed that the move had prompted it to re-evaluate the business case for its 64-hectare datacentre campus in Norway, which has previously been billed as on course to become one of the world’s biggest server farms.

“The company believes that such changes represent a significant impediment to attracting long-term foreign investment to the region and creates uncertainty for other global investors,” said Hive’s note.

“Such changes represent a risk not only for cryptocurrency miners, but for all energy-intensive industries that are considering long-term capital investments, as political forces appear willing to unilaterally propose changes to established frameworks that have attracted investment to the region.

“This is particularly concerning with regard to the development of datacentres, which require long-term capital investment.”

Hive acquired the site in March 2018, and predicted it would go on to become a flagship datacentre project for the firm, which planned to draw on its green energy credentials to provide a sustainably run site for blockchain and cryptocurrency customers to house their infrastructure.

“These abrupt regulatory changes have forced us to reassess the value of our asset in Norway,” said the company’s interim executive chairman, Frank Holmes, elsewhere in the note.

Holmes went on to claim that the proposed tax relief changes are being introduced without any prior discussion with the industry.

“Unilateral decisions by governments without industry consultation and discussion represent a significant risk to stability and long-term investment decisions,” he said.

“Regulatory uncertainty is a significant barrier to attracting long-term foreign capital and governments that unexpectedly move the goalposts create an unfavourable investment environment.”

Hive Blockchain Technologies is not the only organisation speaking out about the plans. The Norway Bitcoin and Blockchain Association previously told Bloomberg of its concerns that the proposals could prompt overseas technology firms to rethink their investments in the country.

While Norway has risen to prominence in recent years as a destination for would-be datacentre investors – thanks in no small part to the country’s abundance of relatively cheap, green energy – concern about how much power cryptocurrency miners consume has been growing for some time.

A report in February 2018 revealed that the energy consumed by cryptocurrency miners operating in Iceland was set to overtake household usage for the first time, prompting concerns about the sustainability of the market growth.

This has led industry stakeholders to speculate that governments across the world might start to introduce regulatory and taxation measures in response.